Surely there are cultural factors at play, but they are not as important (the drive some of the mismatch, but not most of it).
There are two main drivers of mismatch. The first one is pension wealth. When high pension value is expected, median wealth tends to be lower (less pressure for saving).
The second one is the asset/debt ratio, mostly consisting on housing/mortgage ratios (since in developed countries mortgage is the main driver of debt and housing the main driver of wealth). High income allows for expensive mortgages that in turn generates a debt that lowers wealth until it’s repaid. You can get countries with low on paper wealth but many, many assets (mostly real state) and high debt. See Northern European countries.
Both of the above generally work together. High income and high expected pension makes mortgages and long term debts risk-free.
Since the US has both low pension wealth compared to other developed countries and low home ownership (again, compared to developed countries), these two factors fail to explain the mismatch, and make it even more pronounced.
BUT: the lack of home ownership drive the median housing expenses. It’s likely these much higher expenses in housing/healthcare/education are a closer explanation of the mismatch. You are talking easily $20k higher expenses on essentials in the US, on average (median will likely be lower, but there are no numbers). That eats most if not all of the income differential, and eliminates most of the mismatch in income/wealth ratios.
Aceris
4421
Um no.
By far the biggest difference is demographic factors. There is almost a 7 year gap in average age. This will hugely distort wealth figures, especially medians.
I’m talking about income/wealth ratio within the same country. Since income is also correlated to age, the median age of the demographic does not necessarily distort in the same direction, depending on the country.
In some countries income by age group rises faster than net wealth by age group (explained, as above, because high income and high expected pension allows for relatively risk-free high debt) while in others net wealth rises faster that income (which is normally compensated when you input pension wealth, since the countries where this dynamic is more extreme are the ones with lower expected pension wealth).
When you correct for pension wealth and expected debt repayments, differences between countries (in the income/wealth ratio) are significantly eased. What you end up is most developed countries (including the US) with very similar median standards of living, income, etc… despite the apparent differences (even adjusting with PPP).
Now, you are right in that correcting for pension wealth and debt is similar to correcting for age, but taking into account each country specific safety nets/necessary savings for retirement, etc…
Aceris
4423
Right but then you’re comparing that ratio across countries to help justify your claims (see bolded segment below)
Median wealth figures are going to be much more affected by demographic differences than median income figures. A younger population will ceteris paribus have an even flatter “base” to the wealth hockey stick curve than an older one.
Essentially you can’t use medians to do this kind of comparison if your baseline populations have substantial differences, because the median combines both distributional differences within the population with differences in individual outcomes.
US home ownership is higher than Germany, France, Denmark, Austria and Switzerland. Just putting that out there.
It is lower than the OECD average.
It would be odd if some of the imperial profit didn’t spread to everyone in the metropole, even with monstrous inequality. So Community is “Quality of support network” and Civic Engagement is a word salad that ignores participation and political power. Where can I fit walkable cities, transportation, environmental protection, quality of affordable food, community engagement, media independence or sanity? Economic security and working conditions (50h for overwork is all you get, thank you very much)? Maybe just some simple discrimination and harassment, or privacy? Too much?
The price of everything and the value of nothing, with some scientism sprinkles to make your Life™ feel Better™ and not ask too many questions.
Sorry, yesterday was abig work day.
Median age difference between OECD and the US is just 5 years (38,5 vs 43,5). A lot of the young population in the US is not adult (bringing th average down). And the numbers we are seeing (income per household and wealth per adult) look only at adults.
This is the median wealth per household in OECD 18 countries:
Adjusting those 4 years of meadian age difference will bring the US higher, but at most to the average. We can see that if we look at stratified median net worth in the US per age. The jump from the 34-44 bracket to the 45-54 bracket does not quite double the wealth (85% increment) and we are looking at bringing it up from a median age of 38,5 to a median age of 44, so any more detailed age adjustment to bring the US to parity with the OECD 18 will likely be lower in reality.
But still, even assuming the most genewrous adjusment, we are bringing the median wealth in the US to parity with OECD 18 countries.
Yet still the US has a significantly higher median income (PPP adjusted) thanthose countries, and that income does not reflect in wealth even when adjusting for age. As I said, the usual ways to square this off and get similar income/wealth ratios in different countries (pension wealth and asset/debt ratio) do not work for the US (homeownership is slightly lower than average and pension wealth dismal), so the way to square the difference is to look for cost of essential expenses as adjustment to the disposable income numbers.
Aceris
4427
Households with fewer children will tend to have more wealth.
I just don’t think “median wealth / household” is an interesting number in this context.
Looking at that chart I find it very hard to draw a link between inequality and median wealth / household. Signifiers for inequality (high privatised pension provision) and equality (median household is able to make significant savings) pull the value in opposite directions.
It’s not really about inequality. This all started with the FT tweet thread saying the US is a poor country with rich people.
While that’s a pretty questionable point, to say the least, the defense of the US as a country where the median adult is significantly better off than other developed countries used “disposable income” as a measure (and GDP per capita, but that’s so absurd a measure for QoL that it does not need criticizing).
What I’m trying to show is that once you adjust for essential expenses (which are not computed in disposable income measures) the US stops being exceptionally wealthy/income rich at the median, and becomes pretty average compared to other developed countries. Disposable income is a badly named measure that does not reflect real QoL/purchasing power due to widely different essential expense needs between countries with different social service networks.
Wealth is an indicator that by definition has taken essential expenses into account, and there the US (even when adjusting for age) does not stand out among it’s peers. It’s also not particularly low, because at the median the US is pretty average. It’s definitely not a “poor country”.
If we want to look at inequality we can look at median versus average income/wealth ratios, etc… But we do have other tools like the Gini coefficient for that.
Aceris
4429
Right, and what I am saying is that the second paragraph here is wrong because the wealth indicator you are using is too noisy. There are so many factors that pull it in both directions, very significantly, and in ways which are nothing to do with “different essential expense needs … with different social service networks”.
I mean, look at the values for Germany, Denmark, the UK, and the Netherlands in your chart above.
As I said several posts above, in general you adjust median wealth looking at asset/debt ratios and pension wealth. Once you do that the income/wealth ratio is relatively similar across at least the EU countries (where I’ve found analysis done). High income correlates much better with high wealth after adjustment.
In the cases you point out, the median personal debt in the Netherlands and Denmark is extremely high. That low net wealth involves significant mortgaged assets and significant future pension windfall.
And yet again, that adjustment would not move the US too much do to slightly lower average home ownership (and very affordable housing) and very low pension wealth. Germany is a similar case to the US, where some essential expenses are significantly higher and the average (looking at housing) so true disposable income is lower than on paper when adjusted.
At law firm Nixon Peabody LLP, associates have started saying no to working weekends, prompting partners to ask more people to help complete time-sensitive work. TGS Insurance in Texas has struggled to fill promotions, and bosses often have to coax staffers to apply. And Maine-based marketing company Pulp+Wire plans to shut down for two weeks next year now that staffers are taking more vacation than they used to.
“The passion that we used to see in work is lower now, and you find it in fewer people—at least in the last two years,” says Sumithra Jagannath, president of ZED Digital, which makes digital ticket scanners. The company, based in Columbus, Ohio, recently moved about 20 remote engineering and marketing roles to Canada and India, where she said it’s easier to find talent who will go above and beyond.
Since the onset of the pandemic, several employees have asked for more pay when managers asked that they do more work, she says. “It was not like that before Covid at all,” she adds.
Comments by Home Depot Inc. co-founder Bernie Marcus that “nobody works, nobody gives a damn,” with possible implications for the future of capitalism, in the Financial Times spread quickly this week. A spokeswoman for the retailer said: “Bernie Marcus retired from The Home Depot more than 20 years ago and does not speak on behalf of the company.”
Will no one think of the bosses?
KevinC
4432
“People don’t work anymore”, whines rich fuck who hasn’t worked for twenty years.
This shit is so laughable. My niece is an ambitious young 20-something. She has ethical disagreements with the company she works for and in addition to that, she makes quite a bit less than she could make elsewhere despite working long hours, some weekends, etc. so she has interviewed for a couple other jobs. She was recently given a promotion (with additional work/responsibilities) and they gave her a pittance for a pay increase. She mentioned to her immediate superior that the raise was less than she was expecting and that it was inadequate at which point the CEO and VP pulled her into their office and demanded to know if she was committed to the company and if she was thinking if interviewing elsewhere, as they didn’t want to invest in someone with one foot out the door. That sat their and whined and complained about people in her generation having no loyalty and demanded commitment to the company. She smiled and lied through her teeth of course. Fuck 'em.
This attitude just cracks me up. Corporate leaders having been treating workers like disposable garbage for decades, happily destroying livelihoods and upending lives in order to hit quarterly numbers and get that sweet executive bonus money. And they have the fucking gall to complain that workers don’t have any loyalty. Why should they have any loyalty to their employers? They’ve done absolutely nothing to deserve it.
You want people to work for you? You want them to be committed to the company? It’s easy. Pay them well and treat them well and the job will be something they actually value.
This is my favorite part of the article.
I’m confused by some of the responses to this article. Whether someone is under- or over-compensated depends, in large part, on markets. Labor markets, capital markets, and the general economy as a whole. The same employee, doing the same job and producing the same amount of work can be underpaid in one market and overpaid in another. Yet, many of the comments here seem to take the view that there is some sort of black-and-white truth that everyone, everywhere, is somehow always underpaid.
We’re headed into an economic downturn. Expectations will change. Whether that is more work for the same pay, less pay for the same work, or out and out termination, that’s what we’ve seen in past downturns and what we’ll see again. There’s nothing magical about it, for those who have been through one or more of these cycles.
LockerK
4436
Employers will always find an excuse to offer less pay for more work. When COVID hit plenty of companies took the opportunity to lay off a chunk of their workforce citing uncertainty and asked the people left to do more - while on their way to record profits. When employees asked for their fair share - sorry, no. There’s an economic downturn coming. We couldn’t possibly pay you. It’s not really a shock that employees aren’t willing to go “above and beyond” when they’re not treated like people.
I don’t think it was suggested that everyone is underpaid. However, when I see my employer hiring for a functionally similar and equally remote position at 150% of my rate it’s clear that I’m underpaid.
There’s a reason that companies try their best to withhold wage information as much as possible (not including it in job postings, discouraging employees from talking about it) and it isn’t because they’re paying everyone the same reasonable, market rate wage. And similarly, there’s a reason that the easiest way to get a pay bump in most cases is to switch companies.
I mean, do you dispute any of that? Obviously #NotAllCompanies but do you disagree with the fact that companies will, given the choice, pay employees less instead of more?
I think this is a really important point. It is easier to change jobs that ever and people are realizing that loyalty to a single company just isn’t worth it.
Also, if companies need to rely on their employees working overtime and not taking much vacation, then it seems like they need to either change their business or hire more people. As the boss of a company, you might feel personally invested in it, but you can’t expect your employees to feel the same.
Sure. By the same token, any employee will want to be paid more, not less. Blanket statements aren’t all that interesting. If a company is non-competitive and an employee can move across the street to be paid more, then that’s the market at work and that company will need to hire a replacement at market rates. That’s the true disincentive to a company wanting to pay their employees less—no one should be relying on the charity/desire of companies. Hence my comment above about how much/most of this is dictated by markets. How much opportunity is there now, in a down economy, to walk across the street and find more pay for the same or less work?
The major problems with the job market is when there is lack of information and/or some other form of non-competitive behavior (e.g., the collusion seen in software companies about a decade back). On the information front, it’s good to see states like Colorado and California implement requirements to post salary information in job postings. I suspect other states will follow suit.
LockerK
4439
So, the situation in most states then, which you even acknowledge?
I guess I don’t understand your original response confused that employees think they’re underpaid when you admit in the follow-up that companies have screwed over employees to underpay them.
